Let’s face it. Making a successful dropshipping store is difficult these days, but what’s even more difficult is taking to the next level once you’re doing well.
But that’s only if you haven’t explored private label dropshipping. It’s a quick way to not only grow your dropshipping business much faster, but also build a much more long-term business than a typical dropshipping store.
If you don’t already know, private label dropshipping simply means selling your successful product under your own brand rather than with generic branding or no branding, which is how most dropshipping stores work, at least in their initial stage.
In other words, you would come up with your own brand, and then get your brand name and logo printed on your products, so that you’re not just another dropshipper anymore, but a growing brand in your niche.
Without further ado, let’s understand everything there is about private label dropshipping.
When and Why You Need to Start Private Label Dropshipping?
Private label dropshipping comes with some significant advantages for your dropshipping business, but you need to know when exactly it makes sense for you to shift to that model.
After all, it usually calls for a fairly large upfront investment, so you would want to make this shift at a time when you already have a working product that’s worthy of that kind of investment.
In other words, you would want to have a fairly successful dropshipping store to consider the private label dropshipping model. This is because you have to buy a large quantity of a particular product when using this model, which doesn’t make sense if you aren’t get a good number of sales already.
It also helps if you have been selling the produce for at least a few months, as that allows you understand the product well and you can be sure of it not being seasonal or vulnerable to any kind of regulatory issues.
As for why you should consider private label dropshipping, then the simple answer is that it’s an upgraded version of traditional dropshipping and allows you to work on the long-term future of your store.
It also lets you to get around the typical issues associated with the traditional dropshipping model, which can help you stand out in your market and deal with the competition in a much better way.
We will be discussing these things as well as other pros of private label dropshipping in detail below. But before that, let’s understand the pros and cons of a traditional dropshipping business.
Pros and Cons of Dropshipping
Dropshipping has turned out to be an extremely popular way of starting an online business. It has an extremely low barrier to entry (which is a two-edged sword by the way), and anyone can get a dropshipping store up and running in a few hours.
But over the past few years, the competition for a typical dropshipping store has increased manifold. However, that hasn’t stopped people from building a successful dropshipping business.
With that said, let’s take a look at the pros and cons of a traditional dropshipping business.
- Can be started with as less as a few hundred dollars
- With the ease of Shopify, it doesn’t require any technical expertise or developer help
- No need to store any inventory
- Lower fulfillment costs as the supplier ships to the customer directly
- No hassle of sourcing or shipping
- Failed products don’t lead to big losses
- Requires much less work than storing and shipping yourself
- The business can be sold pretty easily, especially when compared to something like an Amazon FBA business
- Low barrier to entry and set up cost mean incredibly high competition
- Less control over the product and quality issues
- Long shipping times
- Lower margins due to high competition
- Supplier issues like product going out of stock or the supplier shutting shop
- Customer complaints regarding long shipping times or quality issues
As you can see, dropshipping isn’t exactly as straightforward as it might seem, or how most of those dropshipping gurus out there might make it seem. That’s not saying it’s not possible or worth trying in any way, though.
It’s just that you can’t expect easy, quick money without putting in some serious work and trying to offer value to your customers. If you only care for the money and not offering value to your customers, then you would certainly struggle to find success, especially sustainable, long-term success.
And that’s precisely where private labelling comes in. It’s something that allows you to take your dropshipping business to the next level, and get around pretty much all the drawbacks associated with a traditional dropshipping business.
Pros and Cons of Private Label Dropshipping
Private label dropshipping comes with some major benefits that not only helps you offer a much better value to your customers, but also grow it beyond what you could with the dropshipping model.
Pros of Private Labeling
Let’s understand these benefits in more detail below.
Transitioning to private label dropshipping would allow you to get much higher margins than you do with your current traditional dropshipping model. This is because of several reasons.
First, when private labeling, you make a larger upfront investment and buy your successful product in bulk. This helps you get cheaper prices, although there are some charges that you may have to pay to put your brand name on the product (but they are negligible compared to the overall cost benefit).
Secondly, by going the private label route, you manage to avoid competition from the other dropshippers selling the generic version of your product to a great extent, as you’re now a brand while they are still a nobody in terms of branding.
Simply having a brand increases the value of your product, which helps you sell it at a higher price.
While branding your product allows you to get better margins as explained above, there are other significant benefits of branding as well.
Branding would help you turn your dropshipping store into a long-term, sustainable business, as it would be hard for new competitors to drive you out of business once you have been established in your niche as a brand.
Branding would also help you stand out from all the generic competitors, giving you a distinct identity in your niche.
There would be many smaller benefits as well, such as a considerably better conversion rate, as potential customers tend to trust a branded product much better than a generic product.
One of the biggest issues with a dropshipping business is the lack of control over what happens at the supplier’s end. They may go out of stock, leaving you in the middle of nowhere with a lot of orders to fulfill.
Similarly, the supplier may start delaying in shipping the orders to your customers, making the already long shipping time even longer for your customers.
You wouldn’t be able to add any kind of value to the product in the form of any improvements either, or be able to make the supplier produce the product in a better quality.
But all these things are possible with private labeling. Besides having your product branded, you can tell your supplier to use better quality materials for your product, or make some useful improvements to it.
You would also be able to offer a much faster shipping time to your customers, as you would have a lot more control over the shipping process.
More Marketing Options
With traditional dropshipping, your marketing options are limited. You can do the usual FB ads thing, but with pretty much everyone else and their dog doing the same with a generic product, you would find it hard to get noticed.
But the same FB ads strategy with a branded, private labeled product would work much better, as customers would think they are buying from a brand, helping you get a much better ROI from the campaign.
In addition to that, you would also be able to use other marketing channels like influential marketing, which may not be possible to use in the same way with a generic product.
This is because many reputed influencers may not like promoting a generic product with no brand behind it. On the other hand, most people wouldn’t have much of a problem with promoting a branded product, even if it’s a new brand.
Over time, you may also have people searching for your brand directly on Google, helping you get direct sales that don’t require spending a dime on advertising.
Getting a Competitive Edge
With a generic dropshipping product, anyone can copy the exact same business model with your exact same product and it wouldn’t take them more than a few hours to do that.
But with private labeling, things would be much harder for your competitors to copy and replicate. They can copy your product, but not your brand, meaning your identity in the niche still wouldn’t be lost.
Furthermore, you can make improvements to your product during the private labeling process while the usual dropshipper sells the inferior, generic version of your product. This gives you a competitive edge that can be extremely important in a super competitive industry like dropshipping.
Cons of Private Labeling
Just like the advantages, there are some drawbacks of private labeling as well, but they aren’t too worrying if you know what you’re doing. That said, let’s understand them in more detail too.
Unlike a typical dropshipping business, private labeling requires a significant amount of capital. You would have to buy the product in bulk from your supplier, and the branding may mean some additional costs for you as well.
Further, if you plan to do it all on your own, you may have to ship the product in bulk all the way from the source country (which would likely be China for most dropshippers) to your country. Then, you will need to rent a warehouse or use the services of a fulfillment center, both of which would add to your overall costs.
Using a dropshipping agent like DropshipBro may make things much easier and cheaper for you with respect to the other costs involved, but you would still have to buy the product in bulk, which means a much larger investment than the traditional dropshipping business.
With dropshipping, if something goes wrong at the supplier’s end or you end up with a wrong supplier, you don’t lose much except perhaps having to refund some orders and getting angry emails from customers.
But with private labeling, you have to be much more careful. If you order from a bad supplier, it may mean big losses for you. Even worse, you may also spend a lot of money on shipping and warehouse costs as well, only to find out that the product hasn’t been made the way you wanted or has quality issues.
A quality inspection service or dropshipping agent based in China can help dilute this risk big time.
If you plan to work as a private label all on your own (without anyone’s help), you will have to handle customs and other legal stuff.
Some sensitive products like baby products can also attract some serious legal trouble, so that’s something to keep in mind as well.
The first type of issues can be dealt with by hiring a professional to handle the legal stuff for you, or using a dropshipping agent based in China.
For the second type of issues, you can simply avoid selling such products, or buy a liability insurance for your business.
Finally, as you can see, the pros of private labeling far outweigh the cons, especially if you use the right ways to get around the potential issues.
So let us now talk about how to start doing private label dropshipping.
How to Do Private Labeling?
Of course, the first and most basic step would be to find a reliable supplier. If you don’t already know of one, you can hire a good dropshipping agent and they may be able to do it for you.
The second step would be to get your products branded and get customized packaging designed for your brand. Chinese suppliers can brand the products in many different ways, but the below are some of the more popular, commonly used ways.
It’s the easiest way to put a brand’s sign on a product, and it’s also pretty cheap. Most Chinese suppliers will even do it for free for you if you buy in a bulk quantity.
It works for pretty much all types of materials, but not if you want to get multi-colored patterns printed on your products.
Thermal transfer is the option where screen printing doesn’t work. In other words, it’s the best bet when it comes to printing very fancy patterns or designs.
It’s a more complicated and expensive process though.
It’s a good option for those that want to get their brand’s name engraved on their product in a way that it makes the branding more attractive.
It’s not expensive and doesn’t require a large MOQ (Minimum Order Quantity) order, but it may not work for all products.
Fulfilling the Orders
This is obviously one of the most important components of private label dropshipping. You have three different options here though, and you can choose the one that fits the bill the best for you.
As the term suggests, self fulfilment is handling the shipping and fulfilment completely yourself.
You would need to rent a warehouse if you’re importing the product in a large quantity, which is typically essential when doing private labeling.
You may either have employees or ship the products yourself when you get orders.
As you can tell, this fulfilment method requires quite some work and effort, and you would also have to spend on renting a warehouse. However, you would be able to save on the cost of using a fulfilment center and offer a much faster shipping time to your customers.
Working with a Dropshipping Agent
This is the path many dropshippings transitioning into private labeling seem to be taking, and for a good reason.
Warehouse costs and employee salaries can be very high in countries like the US, and you would obviously also have to dedicate a lot of time towards the fulfilment part of your business if you’re doing self fulfilment.
While using a fulfilment center is an option too –and we will get to it below – it still means having to import the product in a large quantity, dealing with the customs and other legal stuff, and having to pay a considerable amount in inventory storage and fulfilment costs.
On the other hand, working with a dropshipping agent would not only be a cheaper option, but also involve much less hassle, while offering other benefits too.
If you find a good dropshipping agent based in China, you would be able to leverage their experience and knowledge of the local market. They will be able to guide you through the process of private labeling, as well as help you find the best supplier and the cheapest prices for your products. This alone can make working with a dropshipping agent worth it.
In addition to that, you wouldn’t have to import the product in bulk to your country, and would be able to operate just as smoothly as a traditional dropshipping business, but with many advantages such as more control and faster shipping time for your customers.
Your dropshipping agent would ship the products directly from their own warehouse in China to your customers, just like your dropshipping supplier does, but under your own brand name.
Further, they would also take care of other important tasks like quality inspection, dealing with the local supplier, explaining your requirements better, and making sure the product is exactly how you wanted it to be.
The only drawback would be that you won’t be able to offer as fast a shipping time as with self fulfilment or using a fulfilment center, but it would still be much faster than what your dropshipping supplier offers.
Dropship Bro has been offering this service to its clients since years now, and can help you avoid all potential risks in your private label dropshipping model.
Using a Fulfilment Center
If you want to import the product in a large quantity but don’t want to deal with the hassle of renting a warehouse and fulfilling it yourself, then using a fulfilment center can be a good option.
Once your product reaches the fulfilment center, fulfilling your regular orders will be an almost completely hands-off process for you. However, you do need to keep in mind the things we mentioned above regarding this option.
A Final Word
We again want to reiterate the fact that dropshipping isn’t going anywhere anytime soon. But it’s changing, or rather transforming.
And if you want to stay ahead of the curve, then transitioning to private label dropshipping is exactly what you need to do.
But you don’t have to do that alone. Dropship Bro can help you with that. So don’t hesitate to reach out.